- Sales forecasting
- Quantitative techniques to estimate future sales using a range of forecasting techniques
- Forecasting allows for smoother cash-flow management, inventory & production, financing
- Benefits
- Provides valuable information for a business about the trend of sales and what to expect in terms of revenue
- Lets a business use quantitative data (past sales) and qualitative data (impending changes) to assess the future of the company’s sales and success
- Limitations
- No one can predict the future
- Using different methods, businesses will end up with different scenarios and different trends
- May confuse the business on what strategy to use
- Methods of forecasting
- Four part moving average sales trends
- In order to remove the variations produced by seasons, trade cycles and other variations, and moving average is used to make data smoother
- Given a set of actual sales, you take the average of four points of data (eg. 4 values of revenue/month) and average them, moving left-right
- Corresponds with how sales are usually reported which is quarterly
- More difficult than 3 part moving average (only 3 points are used)
- Time series analysis
- Predicts future sales by identifying underlying trend line
- Seasonal fluctuations
- Seasonal variations in demand
- e.g. pre-Christmas season is capitalized in the USA through the Black Friday and Cyber Monday sales
- Random fluctuations
- Unpredictable fluctuations in sales
- Cyclical fluctuations
- Variations linked to economic cycle of booms and slumps
- Response
- Deliberate actions taken to affect sales (e.g. Sales promotion)
- Extrapolation
- Plotting historical data and extending the trent to project future sales
- Simple but not very accurate
- Delphi technique
- Using a panel of independent experts
- Experts go through a sequence of questionnaires, each of which builds on previous ones, lasting throughout several rounds
- A facilitator provides an anonymous summary of the experts’ forecasts from the previous round as well as the reasons for their judgments
- Market research
- Identify trends and external changes that can impact sales and combine with statistical data
Kim De Leon4.3. Sales Forecasting (HL Only)
